Bharati Shipyard on the brink, following winding-up petitions

Mumbai: India’s second largest private sector shipbuilder, Bharati Shipyard, is on the brink of closure, with the Bombay High Court scheduled to rule this week on the winding-up petitions filed against it by a clutch of creditors, including Life Insurance Corporation (LIC), Shipping Corporation of India (SCI) and IDBI Capital Market.

The shipyard has been making losses for the past three years in a row, and has been unable to service large loans taken by it from a number of banks and financial institutions.

In the financial year 2012-13, it had reported losses of INR4.92bn ($79m), which increased to INR8.79bn in fiscal 2013-14. In the third quarter (October to December 2014) of the just-concluded financial year, it reported a loss of INR988m on revenues of INR20m.

Last year a consortium of lenders led by State Bank of India (SBI) sold 60% of its total exposure of INR58bn to asset reconstruction company Edelweiss ARC. As many as 11 out of 23 banks sold loans aggregating to INR34.80bn.

The company claims that the petitions in respect of ABC Infra, Darshan Road Lines and Super Tug Offshore Services have been disposed off by the Bombay High Court in March this year; and that only the petitions of LIC, SCI and IDBI Capital Market remain to be heard.

A senior executive at a leading public sector bank pointed out that once a court orders a company to be wound up, banks find it virtually impossible to recover their loans as the government, which is keen to recover taxes and provident fund amounts, gets priority even over secured lenders.

Shirish Nadkarni

Shirish Nadkarni is a management consultant and freelance international journalist, who has been writing on all spheres of Indian business for the past three decades for a number of reputed overseas publications. An avid sportsman, Nadkarni has represented India in international veterans' badminton since 1997, and was the 55+ age group doubles world champion in 2005.
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